XL Insurance Company SE, trading as Brooklyn Underwriting v Kerembla Pty Ltd

XL Insurance Company SE, trading as Brooklyn Underwriting v Kerembla Pty Ltd - [2023] FCAFC 183 - FCAFC 2023 case summary — Zoe

B THE REASONING OF THE PRIMARY JUDGE 3 The primary judge commenced (at J [5]) by setting out the salient terms of the Policy including the insuring clause, which provided as follows: 2.1 What we cover We agree (subject to the terms, Claims Conditions, General Conditions, Exclusions, Definitions and Limits of Liability incorporated herein) to pay to You or on Your behalf all amounts which You shall become legally liable to pay as Compensation in respect of: (a) Personal Injury, and/or (b) Property Damage; and/or (c) Advertising Injury; happening during the Period of Insurance within the Geographical Limits, in connection with the Business or Your Products and/or work performed by You or on Your behalf and caused by or arising out of an Occurrence. (Emphasis in original). 4 His Honour then turned to the relevant exclusion clause: We do not cover any liability: … 3.22 Vehicles for Personal Injury and/or Property Damage arising out of the ownership, possession or use by You of any Vehicle: (a) which is registered or which is required under any legislation to be registered, or (b) in respect of which compulsory liability insurance or statutory indemnity is required by virtue of legislation (whether or not that insurance is effected); but Exclusions 3.22(a) and (b) shall not apply to: … (d) any Vehicle (including any tool, implement, machinery or plant forming part of or attached to or used in connection with such vehicle) whilst being operated or used by You or on Your behalf as a Tool of Trade at Your premises or on any Worksite. (e) the delivery or collection of goods to or from any Vehicle. (f) the loading or unloading of any Vehicle. (g) any Vehicle temporarily in Your custody or control for the purpose of parking. (h) Property Damage caused by or arising out of the movement of any Vehicle (which is required to be Conditionally Registered in accordance with the law of any State or Territory in Australia) in the event of Your inadvertent and unintentional failure to effect Conditional Registration. (Emphasis added). 5 His Honour also set out some definitions contained in the Policy which, for present purposes, relevantly included: "Tool of Trade" means a Vehicle that has tools, implements, machinery or plant attached to or towed by the Vehicle and is being used by You at Your premises or on any Worksite. Tool of Trade does not include any Vehicle whilst travelling to and from a Worksite or Vehicles that are used to carry goods to or from any premises. "Vehicle" means any type of machine on wheels or on self-laid tracks made or intended to be propelled by other than manual or animal power, and any trailer or other attachment to be used in conjunction with or drawn by any such machine. "Worksite" means any premises or site where work is performed for and/or in connection with the Business together with all areas surrounding such premises or site and/or all areas in between such premises or site that You shall use in connection with such work. (Emphasis in original). 6 It is convenient to supplement the primary judge's list of relevant definitions by adding the definition of "Business" which the primary judge addressed (at J [12]). "Business" is defined in the Schedule to the Policy as relevantly including, inter alia, mining and civil drilling, exploration drilling and "all activities incidental thereto". The definition of Business is expressly extended to include "the ownership of premises and/or the tenancy thereof by You": subcl 1(b). 7 His Honour noted that XL accepted that the insuring clause responded to the Claim but relied upon the exclusion clause to deny indemnity (at J [9]). Kerembla also accepted that subcll 3.22(a) and (b) of the Policy applied but relied upon the "write-back" provided by subcll 3.22(d) and (f) (at J [9]). The primary judge rejected Kerembla's argument based upon subcl 3.22(f) (which is the subject of a notice of contention) (at J [18]-[20]). For the reasons that follow, however, it is only necessary to deal with the attack on the conclusion reached by the primary judge as to the applicability of subcl 3.22(d) (writeback) (emphasised at [4] above) to dispose of this appeal. 8 The primary judge's reasoning (at J [10]-[17]) involved the following two steps. 9 First, it was not in dispute that the damage arose out of the use by Kerembla of a "Vehicle" and thus fell within the exclusions in subcll 3.22(a) (because of registration or the requirement for registration) and (b) (because compulsory liability insurance was required). 10 Secondly, the writeback operated because both the prime mover and trailer were being used as a "Tool of Trade" because: (a) they were Vehicles that had plant (the excavator) attached; and (b) they were being used on a "Worksite" (the incident took place on a road in between premises or sites where work was performed in connexion with the "Business" of Kerembla). 11 Hence, upon a proper construction of the Policy, it was sufficient to engage cover if the prime mover and the trailer were being operated or used by Kerembla as a Tool of Trade on any Worksite at the time of the incident, and it was unnecessary for Kerembla to establish that every element of the Vehicle (defined to include any tool, implement, machinery or plant attached to it) was actually being used or operated at the time of the incident (at J [17]).

[4]

C THE APPEAL 12 XL raises five grounds of appeal, which it accepts can be summarised into three closely related contentions of error: (1) the insured risk is damage to property arising out of the use of a Vehicle required to be registered or have compulsory insurance and the writeback does not apply to the prime mover and trailer in the circumstances giving rise to the Claim (Grounds 1, 2 and 3) (Use Contention); (2) the definition of Tool of Trade contains a second and third negative requirement, namely that the Vehicle which is the Tool of Trade must not be travelling to or from a Worksite and that it must not be a Vehicle that is used to carry goods to or from any premises (Grounds 1, 2 and 4) (Tool of Trade Contention); and (3) the definition of Worksite could not properly be understood to include the road where the incident took place (Grounds 1, 2 and 5) (Worksite Contention). 13 During oral argument, XL sought to raise a fourth contention by reviving an argument which it made before the primary judge to the effect that Kerembla's own premises at Muswellbrook did not fall within the definition of Worksite. 14 The primary judge rejected Kerembla's submission on this point (at J [12]). His Honour concluded that there was no basis in the language used in the definition of Worksite to confine the concept in the way in which XL sought to do. Although XL did not challenge this finding in its notice of appeal, Kerembla was able to meet the argument, and the appeal proceeded on the basis of a challenge to the finding that Kerembla's Muswellbrook premises fell within the definition of Worksite. We will refer to this additional challenge as the Kerembla Premises Contention. 15 This appeal is not a dispute about principle, but rather the application of principle. There is no need to canvass the proper approach to construction of contracts such as the Policy. We need only refer to the well-known cases as to construction: see Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 (at 510 per Mason, Wilson, Brennan, Deane and Dawson JJ); Johnson v American Home Assurance Company (1998) 192 CLR 266 (at 272-276 [19] per Kirby J, albeit in dissent); McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 (at 589 [22] per Gaudron J); Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 (at 528-529 [15]-[16] per Gleeson CJ, McHugh, Gummow and Kirby JJ); Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336 (at 344 [29] per French CJ, Hayne, Crennan, Kiefel and Bell JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 (at 116-117 [46]-[52] per French CJ, Nettle and Gordon JJ); and Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 (at 656-657 [35] per French CJ, Hayne, Crennan and Kiefel JJ). 16 Specifically, it is not in dispute that where there are two available readings of an insurance policy, preference should be given to a reading that limits rather than expands an exclusion clause: Dalby Bio-Refinery Ltd v Allianz Australia Insurance Limited [2019] FCAFC 85 (at [32] per Allsop CJ, Beach and Anastassiou JJ); see also Darlington Futures v Delco (at 510 per Mason, Wilson, Brennan, Deane and Dawson JJ). 17 It is convenient to proceed directly to the substance of XL's arguments by reference to the four contentions outlined above.

[5]

XL's Submissions 18 XL submits the writeback has operative effect only when the excavator is being used as a Tool of Trade. It is said the approach of the primary judge involved a "discordant construction" as the object of the writeback clause was the excavator, not the prime mover and trailer. The construction his Honour arrived at is said to have "robbed the exclusion of having any meaningful and businesslike effect". 19 This was developed by asserting the evident purpose of the exclusion clause was to deny cover whenever claimed property damage arose out of "the ownership, possession or use by You of any Vehicle … which is registered" except when that Vehicle was "being operated as a Tool of Trade at Your premises or at any Worksite". The evident intention was to exclude property damage occurring while the trailer and prime mover were being used on a public road to transport goods (in this case, the excavator). In this respect, it is said the definition of Worksite is important, because when read harmoniously within the exclusion clause, the writeback is limited to Kerembla's premises or a Worksite where the Vehicle is being operated or used as a Tool of Trade. 20 It is further submitted that the requirement that the "Vehicle is being operated or used" as a Tool of Trade most naturally conveys the meaning that the Vehicle can objectively be said to be operating when using its "tools, implements, machinery or plant attached to or towed by it at the premises or Worksite". For example, an excavator would be operating as a Tool of Trade while excavating using a bucket, blade, hammer, auger or other "tool, implement … or plant" attached to it. A prime mover or a trailer would not naturally be considered a Tool of Trade to be used at Kerembla's premises or on any Worksite through the use of "tools, implements, machinery or plant attached to or towed by [it]". Rather, it is submitted, their purpose is to transport a Tool of Trade, in this case the excavator, to a Worksite.

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Judgment (13 paragraphs)

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Cases Cited (15)